Commissioner Of Income Tax vs Pnb Finance & Industries Ltd.
2010 Latest Caselaw 5186 Del

Citation : 2010 Latest Caselaw 5186 Del
Judgement Date : 15 November, 2010

Delhi High Court

Commissioner Of Income Tax vs Pnb Finance & Industries Ltd. on 15 November, 2010

Author: A.K.Sikri

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         ITA No.1759 of 2010

%                          Decision Delivered On: 15th November, 2010.


     COMMISSIONER OF INCOME TAX                             . . . Appellant

                        through :         Ms. Sonia Mathur, Advocate,

                              VERSUS


     PNB FINANCE & INDUSTRIES LTD.                        . . .Respondent

                        through:          Ms. Akansha Aggarwal, Advocate

CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MR. JUSTICE SURESH KAIT

     1.    Whether Reporters of Local newspapers may be allowed
           to see the Judgment?
     2.    To be referred to the Reporter or not?
     3.    Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. The assessee herein had filed the return of income for the

assessment year 2001-02 declaring total income at `40,41,670. In

this return, the assessee had claimed dividend income of

`,13,08,602 as exempt. The return was processed under Section

143(1) of the Income Tax Act (hereinafter referred to as „the Act‟)

and accepted as filed vide orders dated 14.02.2003. The

Assessing Officer (AO), after few years, i.e., vide notice dated

27.03.2008 reopened the assessment under Section 147/148 of

the Act inasmuch as he was of the view that on the aforesaid

dividend, income for which exemption was claimed by the

assessee, proportionate expenses should have been disallowed

under Section 14A of the Act. In the reassessment proceedings,

the AO, thus, disallowed the expenses to the extent of `27.36 lacs.

2. The CIT (A) has quashed the reassessment proceedings as invalid,

inter alia, holding that proviso to Section 14A specifically bars any

such reassessment under Section 147 prior to the Assessment

Year 2002-03.

3. The aforesaid view of CIT (A) is upheld by the Income Tax

Appellate Tribunal (in short „the Tribunal‟).

4. Proviso to Section 14A reads as under:

"Provided that nothing contained in this Section shall empower the A.O. either to reassess under Section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under Section 154 for any assessment year beginning on or before the 1st April, 2001."

5. A bare perusal of the aforesaid provision clearly brings out the bar

created by the said provision for reopening the assessment under

Section 147 of the Act for any assessment year beginning on or

before 01.04.2001.

6. While learned counsel for the Revenue could not dispute the

aforesaid legal position contained in Section 14A of the Act, she

argues that since the original assessment in the instant case was

done under Section 143(1) of the Act, it would not be treated as

assessment having regard to the law laid down in the case of

Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri

Stock Brokers Pvt. Ltd. [(2007)291 ITR 500 (SC)]. Therefore,

the second assessment made, could not be treated as

reassessment and when the matter is viewed from this angle,

proviso to Section 14A would not be applicable.

7. We are not in a position to agree with the aforesaid submission.

In the first instance, we may point out that the observations of the

Supreme Court in the case of Rajesh Jhaveri Stock Brokers

Pvt. Ltd. (supra) discussing the nature of assessment made

under Section 143(1)(a) were in altogether another context. The

Court was discussing the scope of the expression "reason to

believe" under Section 147 and the validity of the notice under

Section 147 of the Act was being examined, viz., as to whether it

would amount to change of opinion. In that scenario, the

Supreme Court observed that since no mental exercise was done

by the Assessing Officer in the original assessment proceedings,

as the assessment was under Section 143 (1)(a) of the Act,

question of change of opinion would not arise. Our observations

would be same qua another judgment of this Court referred to by

the learned counsel for the Revenue in the case of MTNL Vs. The

Chairman, Central Board of Direct Taxes & Anr. [(2000)

246 ITR 173 (Delhi)] as in that case also the Court was

considering as to whether the ingredients of Section 147 of the

Act were fulfilled, where the validity of reassessment proceedings

was in question.

8. Second and more important reason is that in the present case, the

proviso has been added to Section 14A by the Legislature

categorically providing that the Assessing Officer is not

empowered to do reassessment under Section 147 for assessment

period beginning on or before 01.04.2001. In these

circumstances, the Court has to only examine as to whether the

conditions stipulated in the proviso are fulfilled or not. When the

matter is examined from this angle, it is clear that the conditions

contained in proviso to Section 14A of the Act are satisfied,

inasmuch as:

(a) The reassessment proceedings were initiated pursuant

to notice issued under Section 147;

(b) The notice was based entirely on Section 14A of the

Act. The AO wanted expenditure purportedly incurred

in relation to income earned from the dividend to be

disallowed; and